We believe the following four factors are the drivers of consolidation in the Indian Wireless / Telecom industry.

  • Ongoing Tariff War – We expect tariff pressures to continue. While we believe the price floor may not erode beyond 10%, we expect average prices to decline c25%, as the gap between prices of incumbents and new players will likely narrow.
  • Spectrum and Scale – The total available spectrum in India is not aligned to a market structure of 11-12 players. We expect spectrum constraints to drive consolidation. Moreover, all new players have spectrum in the 1800MHz band, which seriously impairs their viability [High CAPEX] and scale even in the long term.
  • Mobile Number Portability – The fact that the regulator has kept to timelines for the rollout indicates more rapid progress than we had estimated. This is negative for GSM incumbents as new players will make an attempt to target the post-paid subscribers and as a result, Incumbents will therefore have to bring down the premium
  • Telecom Regulations – On one hand, the government seems intent on maximising proceeds from 3G spectrum auctions. It is unlikely that the government will make any regulatory changes required to facilitate consolidation until after the 3G auctions.